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The masterplan for the site also includes industrial parks capable of creating 2,000 jobs. Business leaders have recently warned that the region needs more land earmarked for employment to stop firms relocating elsewhere and moving jobs out of the area.

A new primary school is also included in the plans along with major improvements to the A46 near Walsgrave, for which Highways England has already pledged some funding.

Councils across Warwickshire have been asked to help meet a shortfall of homes in Coventry, and this development was due to help Rugby meet its target. The site falls on the border of the city - between the hospital, Coombe Country Park, Ansty Park and the M6 junction 2.

Plans for the Walsgrave Hill development (Image: Roxhill)

Charles Blake, development director for Roxhill, the developer told the Telegraph: “To us this makes good sense and it was originally in the draft local plan.

“We need to get them to consider whether they will change their draft local plan and we will be pushing for this scheme as an option.

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“We think they are making a mistake not choosing it and we will be working hard to get this put back into the local plan.”

To make the development possible, the current Walsgrave roundabout would be upgraded in a scheme, which Highways England has agreed to fund 50 per cent of the costs.

In order to remodel the roads to provide access to the new development, it is likely that there would be significant traffic disruption in this area, which is a key route for commuters travelling into Coventry.

Also, due to the proximity of the development to Coventry, Cllr Kevin Maton, Coventry City Council’s cabinet member for education and skills, who at the time had responsibility for business, previously said careful consideration needed to be paid to how things would work in reality.

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Business rates and council tax would be paid to Rugby Borough Council but it would be likely that the residents living in the new development would use Coventry’s services.

A spokesman for Rugby Borough Council said: “Walsgrave Hill was not included in the publication draft of the Rugby local plan following a call for sites earlier in the plan-making process and the identification of a more suitable alternative site.

“Councillors will consider the submission draft of the Local Plan, and the sites that should be included, at a meeting to be held on 21 June.”